Growing a business to over $5 million in revenue is possible, but it requires solving key problems at each stage of growth. In this episode of Influence By Design, business growth strategist Michael Wark shares his 3-step framework for scaling a profitable and sustainable business.
Samantha and Michael talk about the distinct challenges faced at each revenue milestone — cracking $1 million, $5 million, and beyond. They talk about the bottlenecks including the founder being overworked, lacking financial visibility into the business’ true profitability, underpriced offers, and not investing in growth.
Michael emphasizes the need for systematized processes and an effective leadership team during the earlier stages of the business. Once these are firmly in place, you can then shift to building business value. This means preparing for exit or acquisition by taking on a more strategic stance in your business and planning for continuity.
While growth presents unique hurdles at each stage, it all comes down to self-awareness and solving the right problems at the right time. Join us for this enlightening episode as we break through the barriers that may be holding your business back from achieving its full potential.
IN THIS EPISODE YOU’LL DISCOVER:
- How Michael Wark started working with business owners to grow profitability (01:55)
- The first stage of business growth (03:44)
- Common challenges to get to the 1 million dollar mark (07:26)
- The second stage of business growth (10:02)
- The average percentage of profit in a coaching practice (12:32)
- The third stage of business growth (13:19)
- The impact of subscription models (19:40)
- The value of bringing in more blue chip clients (20:54)
- Diving deeper into solving the cash crunch (23:12)
- How to build real value and systemize to boost profitability (25:46)
- Michael’s take on the true visibility of a business model (27:22)
“I think the core challenge is that at each stage of growth, there’s a different set of problems that you need to solve. And that’s not immediately clear, when people start out in business.” – Michael Wark
“I feel like there are many people in the startup phase that try and systemize from day one. But you can’t systemize what you haven’t created.” – Samantha Riley
“Growth is achievable. You just need to know which problem to solve and what order to solve it in.” – Michael Wark
- Profit First
- Business Buckets
- Systemology by David Jenyns
- Influence By Desgin Episode 231: The SYSTEMology to Scale Your Business with David Jenyns
WHERE TO FIND MICHAEL WARK
Ebook for listeners: https://jo.my/qr/trimline-growth
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ABOUT MICHAEL WARK
Michael Wark is a qualified Chartered Accountant with over 19 years of commercial experience. He is the founder of Trimline which specializes in helping agency owners & eCom sellers stay profitable as they navigate the growth curve to $5 million in revenue and beyond.
(This transcription is AI-generated and may contain inaccuracies.)
Michael Wark: It’s a common human challenge that we all suffer from that we often think it’s not possible to do it, but often it is. And that’s where building systems and processes, I think the core of solving that is the founder becoming more self aware. And there’s a bit of a personal development journey that has to go along with the business because the. The business would never outgrow the founder. The founder has to work on their own stuff in order to get to that next stage.
Samantha Riley: Welcome to today’s episode of Influence By Design. I’m really excited. Today we’re going to talk about your path to a $5 million company. There are lots of twists and turns that happen along the way to make this happen. And today I have invited Michael Wark on to the show. To walk us through how exactly to do this so that you stay profitable and have longevity in your business. So welcome to the show, Michael.
Michael Wark: Thanks a lot for having me. Excited to have a chat.
Samantha Riley: I’m really looking forward to this because I’ve been reading some of the resources you sent me, and they are some of the best free resources I have ever read. So I know that this is going to be filled with lots and lots of value. Why don’t you start off by telling us how it was that you started working with business owners to be able to get to a point where they’re profitable, where they’re able to really build value and systemize their business. To create not only a business that brings in profitability, but I guess so that you can exit if that’s what you choose to do.
Michael Wark: Yeah, it’s something I’ve spent a lot of time on trying to unpack because I’ve got an added incentive to help people succeed because they’re my clients, the longer as well. And so I tried to analyse the winners amongst the portfolio, the people who were there for the long term, and, um, who grew and tried to unpick what those common patterns were. So I did it from experience, firsthand with my client base, but also through groups and through doing research and trying to unpick what those things were, because I think the core challenge and we were chatting about this just before we hit record, is that at each stage of growth, there’s a different set of problems that you need to solve, and that’s not immediately clear. When people start out in business, you might read a business book, as you mentioned, that’s six years ahead of where you’re at, and it’s kind of like a computer game. You need to solve the problems, the level you’re at. Then you go to level two, you go to level three, and those problems keep changing and evolving as you grow at each stage of growth. And that was the core of, I think, the challenge that that path was not clear. And that’s kind of what I’ve tried to demystify a little bit to give people the toolkit to address, them at the stage they’re at.
Samantha Riley: I love this so much because I often see people in startup that are trying to use the information that are given for businesses that are sort of turning those seven figures in their mind. They’re thinking, well, that’s the business I want to have, or that’s the person I want to be that CEO of that seven figure company. But it’s so not what’s going to help them to get there. Now, I know that only 4% of companies reach that seven figure mark. Can you just walk us through the different stages, I guess, of business growth and some of the challenges that we’re going to see in each of those stages?
Michael Wark: Yeah, absolutely. So I’ve separated it into kind of three stairsteps. The first one is trying to crack that first $1 million mark, and that’s often when the founder is still working very much in the business, still across all of the day to day, probably still has all of the direct reports to them. So it’s kind of the bootstrap phase, almost, where the margins are still kind of okay. But that’s often because the founder is underpaying themselves or sacrificing other areas of the business, and they’re kind of in growth mode. One of the common challenges in that one is they might be under pricing, what they’re doing, or they don’t have a clear idea of what their actual business model should be. Mhm. Discounting is super common, especially as you’re trying to get a foothold in the market or build your brand. But that comes back to bite people later on when the founder is hitting that kind of $1 million mark and needs to start building themselves out of the business and can’t have all those direct reports because they’re going to get burnt out. And it’s not a sustainable model. That’s kind of where they come into the first challenge, which is they’ve got to a certain point through she hard work and slog, but possibly not pricing and packaging their product correctly, and that kind of comes back to bite them. So to get from there into that next stage of growth, there’s a lot of work that needs to be done. There’s a lot of problems to solve in order to get them there. And sometimes you have to go backwards to go forwards, and that’s often the core challenge. And as you mentioned, that only 4% ever make it above that million dollar mark because the founder’s time is limited. And that’s often one of the key bottlenecks of the business. And when I present in person, I have a slide of are you the bottleneck? And I ask a bunch of questions of the founder of what are these things are you doing? Are you micromanaging? Are you parent? Like, all these kind of different things that it could just be the founders not getting out of the way.
Samantha Riley: Yeah. Bottlenecking is something that we talk about on this podcast a lot because it is such a huge block for business owners. And I’ve mentioned it many times before, we actually have a slack channel that’s called bottlenecks. That any of our team or any of us at any time, there’s a Bottleneck. As they’re doing something, they have to put it straight in that slack channel just so it’s straight out of their head, so that it doesn’t get forgotten, so that it can come up on a team meeting at another time, so that we can work through it. But I think that you need to be really honest with yourself and notice when you are the bottleneck. A lot of people say, I don’t delegate because I know I am the best one not going to work.
Michael Wark: Yeah. And it’s so common. I think it’s a common human challenge that we all suffer from that. We often think it’s not possible to do it, but often it is. And that’s where building systems and processes and shifting the mindset. Like you said, sometimes the people to take the company from zero to one mil is not the person to take the company from one to ten or ten to 50. They’re very different leadership styles. Some people aren’t people managers, some people just love the technical stuff and they don’t want to think about all that. So I think the core of solving that is the founder becoming more self aware. And there’s a bit of a personal development journey that has to go along with the business, because the business would never outgrow the founder. The founder has to work on their own stuff in order to get to that next stage. So they’re m so interlinked.
Samantha Riley: Totally. Before we talk about the next stage, I just want to touch on the offer. You talked about the offer or the business model? Actually, you said the business model, not the offer. Can you just talk a little bit about what are some of the things that you see within that business model that will make it unsustainable to move to the next stage?
Michael Wark: Yeah. So common things that I see for businesses in that early stage, that they’re basically distorting reality with what they’re running through the business. There’s a variety of ways people can play the game. They might be running a bunch of questionable expenses through the business to minimise their taxes. They might be overpaying themselves, or they might even be underpaying themselves, depending on the needs of their life. And those things can really distort the true operational model of their business. And 99% of people that I start to work with, I have a look at how they’re looking at a profit and loss, and it’s so distorted. They’re not stripping out all those things. They don’t get a clear understanding of actually how much cash is leaving their business. Another really common one is people taking money out of owner drawings, which is the owner’s withdrawal of cash from the business sits on your balance sheet. Again, maybe 97% of founders I see they don’t look at their balance sheet very often and understand those movements. So that’s a bunch of cash leaving the business that they’re not aware of either. So all of those things, or a variety of basically lead to a distortion. And when you look at your PNL at the end of the month, that number means nothing because there’s huge amount of things missing, primarily the wage of the founder, because the founder will need to build themselves out and pay someone else to do that job eventually. And so if that number is not correct, the whole business model is not correct.
Samantha Riley: One of the things that I see when I speak with some business owners is that their pricing is so low and they haven’t realised that the cost to deliver that product sometimes can even be higher than what they’re actually charging. I’m sure you see that too.
Michael Wark: Yeah, absolutely. I, deal with a lot of service business owners, and underpricing is probably the primary problem. But over servicing is often the real hidden killer because you’ve priced it at a point to get a bunch of clients, but then those clients want a lot of your time and no one can take on more new clients. You get to this point where you’re stuck. And that’s one of the kind of the ceilings people hit is like, the team are overworked. We can’t take on new people. But actually it’s just because your client list is really poor quality. There’s people who are demanding or you’ve trained them to expect more than they should, and you haven’t kept to the scope. And so that’s a really tricky one that I commonly see that try and help unpack because they may have underpriced, but they’re often also over servicing.
Samantha Riley: Good point. So there’s some of the challenges that you see for businesses to get to that 1 million point. What is that next? I guess hurdle or roadblock to get through that seven figure mark.
Michael Wark: Yeah. So once they get to that stage, you’ve got a bit of budget to be building that management team around you. So the chart starts to grow a little bit and you have a little bit of more cash in terms of the wage line that you can be investing in team members. The skill set change, obviously, is you become more of a people manager, a leader. You have to step away from the day to day and trust people to do their jobs. You’re probably building some basic processes so you don’t have to micromanage. So that’s probably the first step. And that often is a great step because the founder will have less direct reports, they won’t have as crazy inbox, and they actually kind of have some air to breathe and think strategically a little bit more, which is often like a really huge positive in most founders lives once they hit that. But then it requires a new set of skills, which is not just putting out fires and the day to day stuff, which is thinking a bit more strategically. And where are you going to invest the funds to get you to the next stage? Often stage one of the journey founders aren’t keeping a lot of cash in the business. This stage, when you’re around that seven figure and want to grow to the five or ten, you need to start thinking about boring accounting stuff like working capital, which is having some cash in your bank account in case things happen. two to three months of operating expenses just sitting there, because sometimes you’ll lose a big client, you still need to meet payroll. So starting to think about those kind of. They’re slightly boring. I try and make them less boring. Concepts of accounting like cash flow, forecasting, planning ahead, thinking about things as an investment. And the main challenge from this one to the next is managing the drops in profitability as you invest to get to the next stage. Because the business will then naturally have to be investing bigger sums, either in sales and marketing, either in hiring that next team member, that expensive next team member to help get you to the next stage. Mhm. Or just investing in other things in the business. And there’s a cash flow hit to investing in the future, and that’s a really tricky balance to manage. So that’s often people not just looking at their pnl, but actually understanding the flow of cash through their business, the timing of when that will hit. And you can only manage those drops in growth if you have a good margins, if you have a good business model, which is why you have to solve that first before you can start riding that wave up to the next stage of growth.
Samantha Riley: In coaching practises, what should we be looking at as an average percentage of profit?
Michael Wark: 30% is probably where you should be aiming, 5% is almost break even, 10% is doing okay, but not super healthy. 30% would be my goal for a coaching practise, but above 20% is a really good range to be in. So anything below that, you’re going to be feeling the effects of the cash flow crunch. If you try and grow, or if you try and grow too quickly.
Samantha Riley: Mhm.
Michael Wark: The cash will grow up. So knowing the speed of growth, the speed which you can invest also has a big impact. So yeah, there’s a lot of factors to play at that, but I think 30% for a coaching practise is a good, healthy target. Cool.
Samantha Riley: So you mentioned there’s three stages. We’ve got the up to 1 million. You’ve just talked about this cracking over that seven figure mark. What’s the third stage?
Michael Wark: That’s once you hit 5 million and go beyond, beyond that. So in terms of the percentage chance of actually getting there, this is super low, which is why I’ve capped it at five. I help people above that. I help people at the $10 million range as well. But the zero to five is where most people fall off and don’t actually make it, which is why I’ve really focused on that. And that’s, I guess you’ve got your growing team and you’ve probably solved a lot of those leadership or self development challenges to grow your team and lead your team to that next stage of growth. But then there’s another game that comes along and you start swimming with bigger sharks and people start talking in your ear about, hey, you’ve got a valuable business here, maybe we could buy into it. And you need to start thinking like a buyer, and you need to start thinking about what true value in a business is. Long term value is in a business and not just the results of the past quarter that come up on your p l or just how much cash you can draw out of the business each month. Because most people who get to this stage and beyond, they realise most of the wealth on exit. They don’t actually realise it on the month to month cash flows. If you build something super valuable, you can exit and we all will eventually have to leave our, business. So it’s a matter of do you sell it to your staff? Do you try and find a partnership? Do you deal with bigger players? For some, it’s just about building themselves out and treating it as a cash cow. Mhm. But all of these techniques and mindsets are going to help you if you want to keep it and keep it for the long term. Still thinking like this is going to help you have a more systemized and valuable business regardless of what you want to do in the future.
Samantha Riley: M I think a little conversation that you and I were having before we hit record is are you building it for cash flow or are you building it to exit? And I mentioned that I always have built my businesses to exit but not exited. So all I’ve done was exited myself from the business that it could keep making cash flow. And for me personally, I like that model. I think it’s great.
Michael Wark: Yeah, absolutely. But like long term, we’re not here forever, so you will have to still eventually hit that point.
Samantha Riley: I’ve exited lots of them.
Michael Wark: But no, I agree. And like we said, if you’re running a business with a nice 20, 30% net profit, that’s heaps more you can get in a bank. And it’s often the best investment you can make in your life. So it’s fantastic to have that and not have the huge time commitment. And often if you have an entrepreneurial mindset, you want to be across a few different things because they always want something to, you know, people always want to want something different to think about and work on.
Samantha Riley: Oh, yeah, we’re a crazy bunch, right?
Michael Wark: Yeah, but the principles apply regardless. And you need to know these regardless if you’re going to play at this level, it’s really important to understand them.
Samantha Riley: Totally. Now, what I really love when I was looking through your resources is you have a three step, I guess, framework for business growth. Actually, I’ll let you go through them first before I, sort of add in here.
Michael Wark: Yeah. And, um, this is from all the research I’ve done, the experiences with my clients, the common threads that I’ve seen of people who have had this success. Generally there’s three steps to how they did it. First, you need to fix your margins and sell like crazy to get to that million dollar range. So that’s what I mean about understanding your business model. Often you don’t know what your margins are. So fix that and sell all the way up to that million dollar mark and you’ve got a bit of budget for a team.
Samantha Riley: Mhm.
Michael Wark: That’s step one. Get to that point.
Samantha Riley: Mhm.
Michael Wark: That’s your first base camp. The second one is to solve the cash crunch and reinvest that cash for growth to get you up to that $5 million range. So the cash crunch is often what happens when people grow. They’ve run out of money, you’re hiring expensive people, you don’t have as much funds. So managing those drops in profitability as you grow. And that’s why we have to fix the margins first to make sure they’re healthy so they can sustain a hit as you grow. So that’s stage two, is solve the cash crunch and reinvest those extra funds as you grow. And then the third stage, that 5 million and beyond, is to start to build real value in the business and systemize it and build yourself out and have that team that’s locked in for the long term and thinking about how you can build IP and increase your multiple and all those kind of game of business stuff. That’s stage three.
Samantha Riley: Love it. I want to start off with number one. I love that you said, fix your margins and sell like crazy because I feel like there are many people in that startup phase that try and systemize from day one and you can’t systemize what you haven’t created. And I love that you just come straight out and say, sell like crazy. I absolutely love it. Because let’s not sort of skirt around the edges here. That’s exactly what needs to happen. There is only one way. So like crazy, talk to us about fixing your margins. So if someone’s in this low six figure mark, or they’re in these six figures, they’re noticing that they’ve got a business offer that’s working, that people want, because that’s really important. Apart from just sell like crazy, what are some of the things they really need to focus on at this point.
Michael Wark: That’s where we get into kind of the pricing and packaging of the offering and um, what’s in there, what’s the team that’s delivering it, what’s the salary mix of the team that’s doing it and actually diving a little bit more into the detail of it. So step one of fixture margins is remove all the distortions that we’ve spoken about personal expenses, put the founders wage in at a market based rate, just get a snapshot of where you’re at the moment. Then once we have that number, we need to improve it regardless. So it’s diving into how you’re pricing and packaging your offering and how long it’s taking you to deliver it. So start thinking about those kind of more detailed ideas.
Samantha Riley: Mhm. And something else you mentioned again before we started recording, we should have hit record much earlier, I think was looking into subscriptions. And I think that this is something that is really relevant in this world of a lot of, I guess everything’s on subscription, right? And it’s so easy for these things to go under the radar.
Michael Wark: Yeah. Um, especially when I first onboarding a new client. That’s some of the low hanging fruit where I try and offer value straight up. I’m like, let’s have a look at your subscriptions account. How many heads, how many seats are you buying for all of these? Do you still use them? What other direct debits are coming off your credit card that you’ve forgotten about? So really trying to reduce their operating expenses as much as possible and make sure they’re running a really streamlined and trim business. So yeah, doing a full expense review is often one of the first things we do to try and justify my fee and say, hey, look, I just found your six grand a month that you have been spending.
Samantha Riley: Mhm.
Michael Wark: That’s great value immediately. So that’s often my hidden tip that I do for people and that shows that there is a lot of stuff to add. But reducing Opex only gets you to a certain point once you’ve done it. And when you kind of do it once every six months or twelve months, Opex will traditionally sit at about 20% of your revenue regularly, or it should sit like that, or below. And then it’s about the engine room of the business, which is how much revenue and what’s it costing you to deliver on that? And getting that right is the most important part, especially for coaches. It’s how many can you take on without burning yourself out and how can you price and package it, that it’s not too demanding on your time and that you can have a really healthy client portfolio. And another quick thing that I do often in the initial stages is have a look at the client list, do some analysis there, and be like, who are the painful ones? Who are the ones you hate draining you of energy that aren’t paying you enough? Maybe the old ones who are on a really cheap plan and very resistant to increasing as you’re growing. It’s them thinking about how we can improve your client list. Treat it like a stock portfolio. Where are the blue chips and where are the penny stocks that aren’t doing anything that we can maybe move on and bring in some more blue chips?
Samantha Riley: Oh, I really love that because I feel that the clients that are on that sort of that lower price bracket, maybe they were those early clients that you bought on. They’re the ones that sort of maybe didn’t have the same boundaries set as some of the clients that you’ve bought on. They’re asking sort of for more and more. And I guess you’ve trained them to do that, right, because you are just trying anything to bring them on. But what can happen is you can feel really resentful towards those clients, and that’s a two way street, because that resentment can be coming from the other side too. So to sort of cut that tie, it just is breathing fresh air into both of your businesses, and it gives you the opportunity to feel good and to go out and get more of those, as you call them, blue chip clients.
Michael Wark: Yes, I completely agree with everything you just said. And often, the thing is, they’re also used to dealing with the founder a lot more. At the start, the founder is in there delivering. They’re the face, they’re the sales call, they often are the onboarding and the deliverer. And so they’re used to a lot more percentage time of the founder. That’s not sustainable. They’re often the lowest paying, most demanding, and need the most of the founder’s time. So it’s clear what needs to happen there if they can’t grow with you. But there’s an emotional attachment, as you said, there’s a weird loyalty. Your day ones got you to where you are, so you don’t want to. It’s relationship based business. We’re in service businesses, so you want to be loyal because they supported you in the early days. So it is awkward. But as you said, that resentment builds up. So that’s why you need people like me to gently guide you towards having harder conversations. Mhm.
Samantha Riley: Love that. So that’s your fixy margins and sell like crazy. Solving the cash crunch and reinvesting for growth. Can you dive in a little bit deeper with this one?
Michael Wark: Yeah, absolutely. So often the number one problem is people don’t have enough cash in their business to make that journey to 5 million. They’re not keeping enough funds in the business. They’re stripping it out for their life. Often this isn’t, I don’t think, technically legal, but, um, I do see out there that people might have it in their overdraft, but it’s a loan and they bring it back in when they need it. So there’s not a lot of funds in the business. Bank accounts there. I really recommend treating this like it’s a publicly traded business and have the cash in your business and don’t touch it. Get used to it being in there because you need those funds. As your business weathers, those profitability drops. So building some working capital or some additional cash in your business is step number one. But then understanding the flow of cash, which is not just your monthly profit and loss, because cash flows in and out depending on when you collect it from customers, when you pay suppliers, understanding what that is, those hidden drops. So, like another one the listeners might resonate with is for, australian businesses managing. When you pay your business activity statement, your quarterly bill, when that comes up, that’s often a rude shock and it’s a lot of money. And often it comes out of nowhere because people are like it was last quarter, but now we’re a month later. And those big chunky bills, you need to manage those as well. And I’ve kind of got a technique for that. Profit first is a fantastic book on that, which is a, kind of cash budgeting tool. And I use a version similar to that, like business buckets, which is just something I’ve created. And you basically setting aside funds to pay your taxes regularly. So little things like that, where every dollar that comes into your bank account, it’s not yours. About 26% of it belongs to the government or to your staff or to someone else. And that’s often a rude shock when founders don’t think that every dollar that lands, they can then spend or take out of the business. So understanding those kind of flows will help you put some aside and then also budget for the future. Big cash bills that come up to help you navigate those. So when one month or one week, you’ve got a Baz bill plus payroll to make. Mhm. Stressed out of your mind. And you’re starting using your credit card to do that. That’s not a good place to be, and that’s not what the professional long term business owners do. So you need to start thinking like that.
Samantha Riley: M love it. And then from there, you’re moving into that, build real value and systemize. Can you talk to us about some of the systems that you see that people really need to focus on setting up to really bring this profitability in?
Michael Wark: Yeah. So most important one that the founders struggle to build themselves out of is the sales one. Mhm. And that’s often because they’re the face of the business. And hiring that really highly skilled salesperson is a real challenge. So often the founder is working in some sales capacity for a long time, probably up to that mark. But it’s all the other things, the delivery, which is really the stuff that the founder can build themselves out of. And that’s where you start to think about departments in your business, your HR, operations, finance, kind of thinking of more of a corporate structure and taking the best of those worlds and having heads of department that report into you, and then having systems within those departments for how things run and how things flow. I recommend a book called Systemology by, David Jenners, which is really good, really simple, and he makes it really easy to understand why they’re important and how to implement them. And that’s the core tenet of any system, is to help the founder build themselves out and help it run like clockwork without them.
Samantha Riley: Totally. We did have David on the podcast a little while ago. We’ll link up that episode in the show notes, because. Yeah, it’s a really good book.
Michael Wark: Yeah, it is. He makes it really accessible, which I love.
Samantha Riley: Yeah. So easy. So you mentioned a little bit ago about the true visibility of a business model. What is a case study or a client that you’ve worked with and how you’ve helped them with this, just to help people start to understand how this could apply to their business and what they need to look for.
Michael Wark: Yeah, absolutely. So a common way I do this, a really simple way, everything I do in my coaching is trying to help the business owner understand their business better. I try and keep it as simple as possible so they understand the tools. Really important one to understand your business model is something called common sizing, which is looking at all the different key categories in your business as a percentage of the overall revenue, and understanding if all that is in balance. And that’s a really critical step to understanding where it’s broken. So I’ve got some key KPIs and metrics that I measure up what a business is doing, and then we kind of work out where they need to go. So an example of this is, for a service business. If you’re bringing in a million dollars in revenue, your labour bill should not be above half a million. I do see some of my kind of agency clients, they might be making up 60% of their revenue is going to direct labour. But anything above that range is starting to squeeze everything else.
Samantha Riley: I’m, um, just feeling ouch. That’s all I can think of right now. Ouch.
Michael Wark: Businesses small than that, less than a million, that will be lower naturally, and you will be more profitable in those earlier stages. But as you grow the team and you’re trying to build yourself out, that’s where your labour bill grows and it starts to get out of balance. So when we’re thinking business models, I would get your audience to have a look at common sizing, run their PNL, and just strip it back to the core basics of what their business is. So, revenue, your cost of goods sold, which might be like your subcontractors and things like that, you’ll have your direct labour, which is anything. So, including the founder, anything to do with delivering it at this early stage, just include in that bucket. And then the rest is just your operating expenses. All your other stuff goes in that other bucket. And then have a look at as a percentage of your revenue, what each of those things are, and then we can start to unpack it. If your opex is operating expenses, is over 20% of your revenue, have a look in there. Have a look at subscriptions. What can you cut? Get that less than 20. If your labour bill is more than 50%, ask yourself for your pricing and packaging your stuff correctly, because it’s going to eat into your margins. And then your cogs. That can, depending on or cost of goods sold, depending on how many subcontractors you use versus direct labour, that number can shift. But all of those things eat up your revenue. And what you want is to have 20% to 30% left over for your profit. And so, as you work your way down that waterfall, the less that they’re taking up, the more profit you have. And that’s a really simple way to understand what you do. And I help people reformat their reports in zero to, look at this regularly and look at it monthly, so they get an understanding of it. And then the next thing I would ask people to do is look at your PNL, not just this month, but over the past twelve and have a look at the trends of those percentages and be like, why is this growing? Why is this shrinking? And then try and get an understanding of the flows or the hidden story behind their business. So that’s probably one idea of a really simple way for people to get a handle on what their business model is and how it’s performing and if they’re out of balance. Mhm.
Samantha Riley: Great tips. Now, you’ve written an ebook and I’ve mentioned it, at the beginning of the episode. It’s a fabulous resource riding the waves of business growth. Can you talk a little bit about who you wrote this for and why someone would want to read it?
Michael Wark: Yes. Anyone who wants to grow a business to above $5 million is going to get value from looking at this. But some of the tips in the established phase will get you to ten as well. As I said at the start, it was trying to unpack those stages of growth and the problems that you solve. So I’ve kind of created a little model or story of a business from year one through to year five and they grow from half a million to a mill, to two and a half to four to five and showed you the key challenges at each stage and trying to, um, unpick what you need to solve in order to get you to that next stage. So it’s a little bit of a playbook, depending on where you’re at, you can read a couple of chapters ahead and see what the problems will be further down the line. But it’s designed for a business owner, to be able to pick it up, identify where they’re at on the journey, go to that chapter and just have a look at those key challenges. And I’d be surprised if something doesn’t resonate because this is based on four to five years of consulting and helping owners in the trenches. So this is all based on things that I’ve seen and experience. So I’m sure something’s going to resonate with people who have a read 100%.
Samantha Riley: Like I said, this is one of the best free resources I’ve ever read. Accounting for a lot of people, especially coaches, who are very creative types, um, switch off to accounting and accountants can be really good at not nurturing those of us that are creative. But the way that you’ve put this together, it makes so much sense. It’s so easy to read. So I really highly recommend that everyone go and grab a copy of that and you can grab a copy of that. It’s in the show notes either down below on the app that you’re listening on influencedbydesignpodcast.com
Michael, it’s been such a fabulous episode. I love chatting about this topic with you. This is a topic that a lot of coaches will sort of put their head under the rug and not pay so much attention to. If there was one thing that you want people to take away from this episode, what would that be?
Michael Wark: That growth is achievable. You just need to know which problem to solve and what order to put it in. So people think that hitting $5 million or hitting $10 million is impossible. And I’ve got a little story or an anecdote. At the start of the ebook, I had a client who told me a few years ago we thought this was never going to be possible. It’s possible for most people. If you want to go after it, you just need to solve the right problem at the right time. So if you want to think big and think about where you want to go in terms of the growth, you have to visualise it and think about what that looks like and then work backwards and work towards it. It’s a clear set of things you need to solve to get there, but it is achievable.
Samantha Riley: Love this so much. Michael, thanks so much for coming and dropping so many value bombs today. It’s just been fabulous.
Michael Wark: Thanks for having me. Appreciate it.
Thanks for joining me for this episode of the Influence By Design podcast. If you want more head over to influencebydesignpodcast.com for the show notes and links to today’s gifts and sponsors. And if you’re looking to connect with other experts who are growing and scaling their business to join us in the coaches, thought leaders, and changemakers community on Facebook, the links are waiting for you over at influencebydesignpodcast.com